U.S., China break off latest trade talks without a deal, as new tariffs rile markets

The Trump administration raised duties on $200 billion of Chinese imports to 25% from 10% early Friday. China's Commerce Ministry said it would impose "necessary countermeasures" but gave no details. (May 10)
AP, AP

"The relationship between President Xi (Jinping) and myself remains a very strong one, and conversations into the future will continue," Trump said in a pair of tweets hours after the talks broke up. "In the meantime, the United States has imposed Tariffs on China, which may or may not be removed depending on what happens with respect to future negotiations!"

The president also threatened new tariffs on China if a deal is not reached, but did not set a deadline as he did earlier this week, a move that roiled markets and pressured Chinese negotiators.

The U.S. and China also did not set a schedule for new talks.

Tariff rates jumped to 25% from 10% on a massive range of Chinese goods, including office furniture, handbags and frozen catfish fillets.

Earlier, in a morning set of tweets sent just hours after new tariffs took effect, Trump said that "talks with China continue in a very congenial manner – there is absolutely no need to rush."

Global markets have dropped throughout the week, as investors feared new U.S. tariffs and Chinese retaliatory barriers will raise prices for consumers and slow the global economy. But on Friday the Dow Jones Industrial Average closed up 0.44% after Treasury Secretary Steve Mnuchin earlier said talks had been constructive.

Over the course of the past two days, the United States and China have held candid and constructive conversations on the status of the trade relationship between both countries. The relationship between President Xi and myself remains a very strong one, and conversations....

Liu He, China’s vice premier and top trade negotiator, told reporters at his hotel that the talks went “fairly well.”

After a day of sending mixed signals on the progress with China, Trump caused new jitters for traders when he deleted his Twitter thread in which he said Chinese trade talks were progressing in "a very congenial manner" and that there is "no need to rush" a new agreement. Trump re-posted the message later.

While Trump claimed that "tariffs will bring in FAR MORE wealth to our country than even a phenomenal deal of the traditional kind," market analysts noted that China will retaliate by increasing tariffs on U.S. goods.

The results, they said, will be higher prices for consumers, perhaps less trade between the world's two largest economies, and more complicated negotiations on a new trade agreement.

New U.S. tariffs of 25% on $200 billion in Chinese goods went into effect at 12:01 a.m. on Friday, after the two sides were unable to nail down the details of a new trade agreement during talks on Thursday. Trump also has threatened to extend the tariffs to $325 billion in Chinese goods.

Trump met Thursday night with Mnuchin and U.S. Trade Representative Robert Lighthizer, and they agreed to "continue discussions" on Friday with the Chinese, the White House said.

Trump expressed both optimism and pessimism about a new trade deal in the run-up to the Friday deadline, which roiled markets as investors tried to parse the president’s words and assess whether he was serious about raising the tariffs.

Trump announced the new tariffs on Sunday on Twitter because he was angry about the pace of the talks and at what he said was China’s attempts at backtracking on several commitments it had made during months of negotiations.

The threat came after Trump and his top economic advisers had said for weeks that talks with China were progressing and that a deal was imminent. As late as Thursday afternoon – hours before Liu He met with his counterparts in Washington – Trump signaled that a deal with Beijing remained within reach.

Speaking to reporters at the White House midday Thursday, Trump indicated he was ready to move forward with the new tariffs. But he also said he had received a "beautiful letter" from Chinese President Xi Jinping and would likely speak to him about the negotiations.

“We were getting very close to a deal and then they started renegotiating the deal," Trump said. "He just wrote me a beautiful letter. I just received it."

China has denied that it is attempting to renege on its commitments and threatened to retaliate with tariffs on unspecified U.S. products if Trump followed through with the new tariffs. It said Trump's threats were needlessly stressing world markets.

U.S. farmers and business leaders urged Trump not to go forward with the tariffs, warning they could result in up to 2.1 million job losses over the next three years.

Trump, who ran for president in part on a promise to renegotiate U.S. trade agreements, has made threats to raise the Chinese tariffs to 25% twice before, and then backed down at the last minute. Trump cited "substantial progress" in late February when he pushed back a March 1 deadline to reach an agreement or impose higher duties.

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